Australian bond futures prices are higher as traders moved into safe-haven assets, amid nervousness about US budget negotiations and eurozone instability after the Italian election.
UBS interest rate specialist Matthew Johnson said weak domestic construction data added to the pessimistic tone of the day.
The Australian Bureau of Statistics (ABS) reported a 0.1 per cent fall for the December quarter in construction work done, well below the 1.5 per cent rise the market had forecast.
Mr Johnson said there were concerns about the unclear Italian election result and worries over the possibility of a US government shutdown if Congress and the White House could not agree on proposed budget cuts.
About $85 billion of automatic spending cuts scheduled to start on Friday, which could put the US back into recession.
"I think people are a bit short, or have been a bit short, so the weak data (construction) today was not a huge deal," Mr Johnson said.
At 1630 AEDT on Wednesday, the March 10-year bond futures contract was trading at 96.690 (implying a yield of 3.310 per cent), up from 96.645 (3.355 per cent) on Tuesday.
The March three-year bond futures contract was at 97.290 (2.710 per cent), up from 97.260 (2.740 per cent).
On Thursday, the ABS will release its capital expenditure and expected expenditure data for the December quarter, which Mr Johnson said would be closely watched by the market.
"The market is looking for a weak number.
"It's pretty hard for it (bonds) to keep rallying just on domestic data.
"I think we need further global drivers.
"So all eyes will be on Italy."